Former Lieutenant Governor Betsy McCaughey (R – New York) has discovered the formula for delivering a 20 percent corporate-tax rate in 2018 — as the U.S. House wishes — not 2019, as the Senate voted, thus flirting with GOP political suicide.
McCaughey, a senior fellow with the London Center for Policy Research (as am I), offered a delightfully simple plan in Wednesday’s New York Post: “This beautiful committee,” as President Trump dubbed the House-Senate conference, should accept the House’s January 1, 2018 date for the corporate tax to plunge from today’s 35 percent rate to a new, paradigm-shifting 20 percent.
And how would conferees “pay for” such history-making tax relief for American business, one year earlier than the Senate wants? The conference committee should adopt the House’s $1,600-per-child tax credit, not the Senate’s $2,000-per-child credit. As McCaughey explains, the ensuing $150 billion savings would cover more than the roughly $127 billion needed to make U.S. companies globally tax-competitive — in 2018.
Today’s per-child tax credit is $1,000, so inserting the House language into the final tax measure would increase by 60 percent the tax credit for “the children.”
However, this would not double that tax benefit, as the Senate desires. In exchange for a mere 60 percent more love than today’s tax code shows our boys and girls, every American — even the childless — would benefit from giving U.S. job creators their biggest tax cut ever, and in just over three weeks, not 13 months.
McCaughey, whose 1994 New Republic analysis fatally wounded HillaryCare, has worked her magic again, but in reverse: Rather than kill a bill that deserved to die, her proposal would save Republicans from a possibly recession-creating one-year delay in corporate-tax relief. If she prevails, CEOs would be incentivized to hire, invest, and produce, with the full advantage of the 20 percent corporate rate — as soon as New Year’s Day.
This would be far better for all Americans than if business owners and executives sat on their hands for 12 months, awaiting these inducements until 2019 — almost certainly slowing the economy. Such doldrums would crush GOP prospects in the November 2018 midterm elections as well.
This great policy is also great politics. Although it probably would do little for growth, the House’s expanded child credit would give parents 60 percent more per kid than they see now. This qualifies as middle-class tax relief, and may have a positive cultural impact as well.
More importantly, a 20 percent U.S. corporate-tax rate, significantly below the global average of 23 percent, would likely unleash economic growth well above last quarter’s 3.3 percent GDP expansion. (Keep in mind: a 20 percent corporate tax would be nearly 43 percent below the current 35 percent commercial levy.) Next year’s output boost could dispatch the lie that America is cursed with a stagnant “new normal,” à la Obama’s comatose 1.5 percent average annual growth.
If the economy soars next year, Republicans would likely keep the U.S. House next November. And if they maintain their existing margin and gain at least eight Senate seats among the 25 that Democrats must defend, Republicans could win a filibuster-proof 60-vote majority. This scenario would vindicate House minority leader Nancy Pelosi (D – California): The $1.5 trillion GOP-Trump tax cut indeed could be “Armageddon,” as she called it — not for America, but for Democrats.
Republican conferees should follow McCaughey’s other key piece of advice: They should heed the Senate and make Obamacare voluntary by junking the individual-coverage mandate. Those who want Obamacare may keep it. Those who do not could make other arrangements without being taxed 2.5 percent of household income or $700 (whichever is higher) for not buying something that Uncle Sam demands they purchase against their will. Since 80 percent of the 6.7 million Americans who paid this tax penalty in 2016 made less than $50,000, sparing them this costly indignity also constitutes a middle-class tax cut.
Once again, Betsy McCaughey is right, as she so often is. Peace be upon her.